U.S. Retail Sales Rise on Gain in Gasoline Purchases

U.S. Retail Sales Rise on Gain in Gasoline Purchases

April 14 (Bloomberg) -- Retail sales in the U.S. rose in March, reflecting increases in receipts at service stations as gasoline prices jumped.

Purchases rose 0.2 percent last month after a 0.4 percent decline in February, the Commerce Department said. The median forecast of economists surveyed by Bloomberg News projected no change. Purchases excluding gasoline were unchanged last month after falling 0.3 percent.

Spending, which accounts for more than two-thirds of the economy, is waning as consumers pay well over $3 a gallon for gasoline just as their jobs are in jeopardy and their homes lose value. Investors are betting the Federal Reserve will need to lower interest rates again to shore up confidence.

``Spending is pretty sluggish,'' said Kevin Logan, senior market economist at Dresdner Kleinwort in New York, who correctly forecast the sales figure less autos. ``If you're getting an inflationary increase in gasoline and food, that would mask the true weakness in consumer spending. This is consistent with recessionary conditions.''

Treasury securities, which had risen earlier in the day, pared some of their advance. Yields on benchmark 10-year notes were at 3.44 percent at 8:58 a.m. in New York, from 3.47 percent at last week's close.

Economists' Forecasts

The median forecast was based on 65 economists polled by Bloomberg. The government had previously reported a 0.6 percent drop in February sales.

Excluding autos, sales rose 0.1 percent, as forecast, following a 0.1 percent decline in February.

The figures aren't adjusted for inflation, so price increases can influence the data. The average cost of a gallon of regular gasoline last month jumped 6.9 percent compared with February, according to figures from AAA.

Receipts at filling stations increased 1.1 percent in March following a 0.5 percent decline the prior month.

``Gas essentially is accounting for the whole increase'' in retail sales, Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York, said before the report. ``Consumers haven't been this cautious in a very long time and that is likely to translate into a soft profile for consumer spending.''

The housing slump was also apparent in the figures. Sales of furniture, electronics and appliances, and building materials all dropped in March.

Today's report showed sales at automobile dealerships and parts stores increased 0.2 percent after dropping 1.2 percent in February. .

Confidence Weakens

Americans are buying fewer big-ticket items like homes and refrigerators as consumer confidence drops and companies cut staff.

Consumer sentiment slumped to a 26-year low this month, according to a preliminary report from Reuters/University of Michigan issued last week. The index of expectations for the next six months, a leading indicator of spending, dropped to the lowest level since November 1990.

Cars and light trucks sold at an average 15.2 million annual pace in the first three months of the year, the fewest since the third quarter of 1998. Auto sales will fall to 14.9 million this year, the lowest since 1995, Standard & Poor's forecast last week.

Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product, sales increased 0.2 percent after no change the prior month. The government uses data from other sources to calculate the contribution from the three categories excluded.

Worst in Year

Purchases at general merchandise stores dropped 0.6 percent. Sales at stores open at least a year fell 0.5 percent in March, the biggest decline in almost a year, the International Council of Shopping Centers said last week.

Consumer spending will rise at an average annual pace of 0.5 percent in the first half of the year, according to a Bloomberg survey of economists taken in the first week of April. That would be the smallest two-quarter gain since purchases dropped in the six months that ended March 1991.

The odds the economy will be in a recession in the next 12 months jumped to 70 percent from 50 percent in the prior, March survey, according to the latest Bloomberg survey.

Employers cut 80,000 workers from payrolls in March, a third straight reduction and the most in five years, the government said this month. The unemployment rate rose to 5.1 percent, the highest level since September 2005.

Retail Outlook

Some retailers aren't counting on a quick end to the U.S. economic slump.

``I don't think we're very optimistic about it ending anytime soon,'' J.C. Penney Co. Chief Executive Officer Myron Ullman said last week at the World Retail Congress in Barcelona. He reiterated that J.C. Penney plans to open 36 stores this year, down from an original plan of 50.

Fed officials, during their March 18 policy meeting, raised the possibility the economy would shrink in the first half of the year, according to minutes of the gathering issued last week.

``Many participants thought some contraction in economic activity in the first half of 2008 now appeared likely,'' the report said. ``Some believed that a prolonged and severe economic downturn could not be ruled out.''

Investors project the Fed will keep lowering the benchmark interest rate to revive the economy. Investors last week were evenly divided on whether the Fed would cut its key rate by a quarter point or a half point at its April 30 meeting, according to trading in the futures market.

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